Since the beginning of the week the British pound declines against the greenback. As a result, GBP/USD erased over 50% of the earlier rebound and slipped under 1.3200. How low could the pair go in the coming days?

In our opinion the following forex trading positions are justified - summary:

• EUR/USD: short (a stop-loss order at 1.2250; the initial downside target at 1.1510)
• GBP/USD: short (a stop-loss order at 1.3773; the initial downside target at 1.3000)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Looking at the above charts, we see that EUR/USD is trading at yesterday levels, which means that what we wrote on Friday remains up-to-date also today:

(…) EUR/USD reversed and declined after an increase to the neck line of the head and shoulders formation and the lower border of the orange resistance zone seen on the monthly chart. Taking this fact, the current position of the daily indicators (…) and the sell signals generated by the long-term CCI and the Stochastic Oscillator, we think that the recent upward move was nothing more than a verification of the earlier breakdown below the above-mentioned resistance. If this is the case, EUR/USD will decline from current levels and re-test the green horizontal support line based on the mid-August low in the coming days.

Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): Short profitable positions (with a stop-loss order at 1.2250 and the initial downside target at 1.1510) are justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

GBP/USD

Quoting our last commentary on this currency pair:

(…) GBP/USD rebounded (…), which resulted in a climb to the 50% Fibonacci retracement. Despite the improvement, (…) the sell signal generated by the Stochastic Oscillator suggests that lower values of GBP/USD are just around the corner (especially when we factor in the sell signals generated by the weekly indicators, which continue to support currency bears).

From today’s point of view, we see that the situation developed in line with the above scenario and GBP/USD declines since the beginning of the week, making our short positions more profitable. Additionally, the sell signals generated by the indicators remain in play, signaling further deterioration.

Therefore, we believe that we’ll see a realization of our pro-bearish scenario in the near future:

If (…) the pair moves lower from current levels, we’ll likely see a decline to the lower border of the brown rising trend channel marked on the weekly chart and the support zone created by the 76.4% and 78.6% retracements (around 1.3000) in the coming week.

Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: mixed with bearish bias
LT outlook: mixed

Trading position (short-term; our opinion): Short profitable positions (with a stop-loss order at 1.3773 and the next downside target at 1.3000) are justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

AUD/USD

The situation in the medium term hasn’t changed much as AUD/USD is trading between the orange resistance zone and the yellow support zone.

Today, we’ll focus on the very short-term changes.

On the daily chart, we see that the 38.2% Fibonacci retracement encouraged currency bears to act at the beginning of the week. As a result, AUD/USD reversed and declined, which together with the sell signals generated by the CCI and the Stochastic Oscillator suggests that we’ll see at least a test f the support zone created by the green horizontal lines and the October low of 0.7730 in the coming days.

Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager

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